DRIP PORTFOLIO
Drip Investing Overseas

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By Vince Hanks
May 11, 2000

The number of overseas companies offering Drips has grown significantly over the past few years, allowing Drip investors in the U.S. the ability to include a little international flavor to their portfolios.

Foreign companies offering shares on the U.S. exchanges trade as either an American Depositary Receipt (ADR) or they are directly listed if they originate from those companies that allow the trading of shares worldwide. The majority of directly listed, or "New York" shares, as they're sometimes called, are from The Netherlands.

ADRs were born in 1927 as a result of British law prohibiting British companies from registering their shares overseas. American Depositary Receipts are certificates issued by a U.S. Depository Bank, representing foreign shares held by the bank. An ADR may represent one share, a partial share, or many shares.

American Depositary Receipts trade just like any other stock on the U.S. exchanges. Dividends, if any are paid, are distributed in U.S. dollars, and customary tax forms are issued. ADRs may be "sponsored," meaning the company provides financial information, assistance, and in some cases, subsidization of the ADR administration. "Unsponsored" ADR's receive no such assistance.

There are now more than 200 foreign companies that allow U.S. investors to buy shares directly through their dividend reinvestment plans. In fact, out of the top ten ADRs held, eight of them offer a Drip. Those eight are:

Although ADRs trade on the U.S. Exchanges, they carry with them the same political and economic risks as the underlying foreign shares and will be affected by currency fluctuations. Also, information regarding foreign companies is not as easily accessible and it's not always easy to understand. Many foreign companies do not report financial results quarterly and foreign currencies can sometimes make direct comparison to U.S. companies difficult.

Investors should also keep in mind that foreign Drips and direct purchase plans usually have higher fees associated with them than their U.S. counterparts.

If you're looking to add a little international diversification to your portfolio without the inherent risks of foreign stock exchanges, Dripping in an ADR might be for you.

Drip on, Fools!

Drip Portfolio

5/11/2000 Closing Numbers
Ticker Company Day Chg % Chg Price
CPBCAMPBELL SOUP1/21.74%$29.25
INTCINTEL CORP1/28.96%$115.56
JNJJOHNSON & JOHNSON9/160.66%$86.06
MELMELLON FINANCIAL CORP1/43.86%$33.63

  Day Week Month Year
To Date
Since
7/28/1997
Annualized
Drip 5.41% -1.40% -2.44% 14.49% 48.74% 15.29%
S&P 500 1.79% -1.73% -3.07% -4.18% 49.96% 15.63%
S&P 500(DA) 1.79% -1.73% -3.07% -4.18% 52.58% 16.35%
S&P 500(DCA) n/a n/a n/a n/a 23.02% 7.71%
NASDAQ 3.39% -8.31% -9.35% -14.00% 122.96% 33.30%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
9/8/199722.9859INTC45.653$115.56153.13%
11/14/199714.965JNJ78.923$86.069.05%
11/5/199831.5773MEL34.290$33.63-1.94%
4/13/19988.269CPB54.401$29.25-46.23%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
9/8/199722.9859INTC$1,049.37$2,656.31$1,606.94
11/14/199714.965JNJ$1,181.08$1,287.93$106.85
11/5/199831.5773MEL$1,082.79$1,061.79($21.01)
4/13/19988.269CPB$449.84$241.87($207.97)
  Cash: $0.01  
  Total: $5,247.90  


Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.